Wednesday, March 23, 2011

Update for 23rd March 2011


 Nifty Future Poised Just Below the 5450 Resistance !

There has not been much happening in the stock markets off recently. Major indices and stocks are mostly trading sideways now a days. There are many reasons for this phase. Here are some of the reasons ! Stocks went northwards in to the realms of expensive valuations in the last quarter of the  previous year. Some of the stratospheric valuations have been corrected. The pivotal Stocks are neither cheap nor very expensive at present but most of them are retaining the bull market valuations still.  For example, the Nifty trailing Price Earnings Ratio, ( PE Ratio ) has corrected from the near 26 times levels to the 20 - 21 levels at present.  The so called mid and small caps have almost seen  a bear market by now. Now the uncertainty is about the adverse impact from the rising interest rates and inflation on the corporate profit growth. The small and midcaps are the first ones to fall in the face of any adversity. Now what is the future course ? Markets need conviction about the  resumption of unhindered profit growth of around 20 to 25 %. But no such triggers are seen available at present. Therefore, stocks are spending time, trading mostly in a sideways range, waiting for triggers. Until more clarity arrives or valuations become cheaper, stocks may behave like this.  No amount of analysis, neither technical nor fundamental, can be of much use in situations like these.

As there is no change in the technical position of the market for the reasons described above, this post is limited to just the usual charts, data and trading system updates. Please read the previous posts for supports and resistance levels.
  Nifty Futures - Intra-day Chart





    Nifty Futures  - Daily Chart 

 

 Nifty Options Scene   

The March series Nifty Options Put Call ratio ( PCR )  remained mostly unchanged at 1.10 times on  Tuesday. The Put Call ratio still remains above par at present. ( In the Indian context lower PCR is generally associated with market falls and this is just the opposite of what many option textbooks suggest. ) The India VIX index crashed by 11.7 % and closed at 22.26 on the back of the recovery in the market. As the mostly unchanged PCR would suggest, the option scene also did not change much on Tuesday. The 5500, 5600 and 5700 strikes still remain as the strikes with the highest level of March Nifty Call OI as on Tuesday.   The corresponding strikes for Put OI are 5400, 5300 and 5200.  Some Put writing was seen at the 5400 strike on Tuesday.  The implied volatility of Nifty options as indicated by the India VIX has been hovering in the 20 plus mark for some time  even as the  market is generally trading range bound. It seems that the improvement in India VIX and the neutral nature of the markets has lead to a situation where the option writers are taking it as a field day for writing straddles and strangles. However, in case of any breakout happening in the market, especially towards the lower side, that might force the option writers running for cover. This might aggravate the condition of the market as seen on the last derivative expiry day. 


 Nifty Trailing Fundamentals    
  


The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 20.73, 3.43 and  1.15 respectively as on  22nd March, 2011.  ( More information and a long term analysis on Nifty historical valuation are available from the "Nifty Fundas" page ). 

 Latest Ultimate Momentum Signal 


The Momentum Signal ended up in the maximum negative momentum territory  for the fourth day in succession. 

Projected Momentum Signal Close Values

The projected levels of Momentum Signal values applicable to various ranges of closing values of the current month Nifty Futures, Nifty Index and the BSE Sensex,  as at the close of next trading day, ie. as on  23rd March, 2011, are given in the following table. All readers are requested to take note that the table below is just a ready reckoner for the next day's Momentum Signal values and the figures are not intended to be interpreted as any targets for the Nifty futures or indices shown therein.
Click on the table above for an enlarged view.


Readers are also requested to go through The Signal, Entries and Exits, Position Limits, Risk Factors, Risk Analysis,  and FAQs pages to gain a reasonable understanding of the trading system. Please do post your  comments and suggestions on how new  posts can be made more useful.

Cheers and Prosperous Investing and Trading !!!

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